Fraudulent charges and chargebacks are part of the ugly side of hospitality.
NB: This is an article from Mews
Not only do they eat away at profits, but handling the aftermath can be a drain on your valuable time. Not cool. We’ve already written about how hotel chargebacks work, but how can you prevent them in the first place? That’s what I’ll cover in the rest of this article, with some universal tips.
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Common fraud scenarios
Before we take a look at some of the steps you can take to prevent fraudulent chargebacks, it makes sense to examine the most common scenarios that your hotel will be faced with. There are any number of ways that a fraudster could get access to someone else’s card details:
- Phishing (phone calls, emails, fake websites)
- Malware and spyware
- Skimming (mostly at ATMs)
- Data breaches
- Public Wi-Fi networks
- Searching through the trash (old fashioned, but it still happens a lot)
Fraud scenario 1
One of the most common ways people try to trick hotels is to book a stay with someone else’s ID and credit card. This could have been taken by any of the means above or purchased for cheap on the dark web – credit card details can go for as little as 70 cents.
Once they have the card and ID, they’ll make a reservation. For them, it’s important to use your services within the next few days in case the real cardholder notices suspicious activity and notifies their bank. As it usually takes a few days for the bank to start their investigation, fraudsters prefer short stays and pay on the day of arrival or just before their stay.
Although they can use various sources to make a reservation, they’ll most commonly use direct emails or phone calls. As far as your team knows, everything seems normal. But then a few weeks or months down the road, a chargeback claim comes along with the reason, ‘fraud’.
Fraud scenario 2
Another common example of fraud is the reservation cancelation scam. You receive a booking via email paid for using a credit card. The guest cancels the booking shortly afterward and asks you to refund some or all of the payment by returning the funds via bank transfer or other method.
It’s likely that a stolen credit card was used to make the booking, and the scammer is hoping you’ll trust whatever story they come up with and do as they say – after all, there’s a lot of pressure for your team to provide great customer service.
When this happens, always refund the credit card transaction to the card that was used initially. Otherwise, you can lose not only the money billed to the credit card (via a chargeback) but also the money you send to the scammer.
Although these are the most two common scenarios in the hospitality industry, there are plenty more. Fraudsters are constantly finding new, creative ways to attack businesses – but with these tips below, you’ll have a much better chance to defeat them.
